So I noticed that it's been about one year since I went to a Forex Convention held by some company that was trying to sell MACD software for thousands of dollars. It got me thinking of where I am today with those 10 page codes...
Well here is my view on Old versus New and how I think the way to go is to stay with what I started with.
As humans we try to get as much money as possible, we feel bad when the market goes the wrong way, hardly accept losses, etc. With new technology and life moving at an extremely fast pace, we want LOTS of money and we want it NOW.
The old strategy was start with a big 5 or 6 digit number (tens to hundreds of thousands) and work with a huge margin, where 10 pips is seen as only pennies in the bank; The strategy was buy when there’s an up trend in the 1H or 4H market and most of the moving averages in the other time frames agreed, and sell when it was going down. Then close when there are 100 pips in the bank.
The new strategy is to make hundreds of trades per day starting with a few thousand dollars, making small amounts of money per trade which in the end accumulate to a lot. A position is always opened, we try to squeeze the market for every pip that it has.
As you can see the first one requires lots of money and not a lot of brains, just the need to know when to close. The second one requires lots of brains, a way to read the market for every direction it goes; which, to my knowledge, is near impossible.
Here is my proposal: A mix of both. Sounds rather cheesy but I believe this could be successful. Open trades using the old strategy, but not aim for huge gains, a mere 10-20 pip gain on a big scale looks like nothing. One trade per day with good money management will make a steady and good income. We traders need to come back to earth and stop expecting millions of dollars from this. As the commonly used Forex quote I keep hearing goes "it takes money to make money". I believe that is 100% true not only in the way that we are buying and selling contracts for exchanging money, but that the rich get richer, more money means bigger gains (and bigger losses).
Now let me come back to my story about my one year anniversary. So I was sitting at a sort of presentation which introduced a program that was basically just MACD/Moving Average on different time frames decorated with shiny, large, green and red buttons telling you when to sell and when to buy NOT when to close. This was sold at $2,000 with a huge monthly fee. I noticed that the way they were selling this is that when you start the trade you DO make profit; the problem is when to stop? In such a big timeframe, 50 pips can easily go in the market's direction no problem, but then it can go back and smack down in the other direction. So why don't people close at 50 pips? GREED
GREED is the key element in a human, it makes us want to keep going, hope that it will go our way. Money management usually doesn’t cross the mind; most of us just think “Let’s gamble it all on that trade. The market will end up touching that 200 pip take profit that I set.”
I say scalping is probably not the right way to go, too much noise to make something out of it.
The moving average IS a lagging indicator, but on a big time frame with smaller time frames backing it up, it WILL show you the direction the market is going for at least another candle or two, which is easily a 50 pip move. A small goal with a high amount of lots almost guarantees a win.
I will be testing out this strategy; I will look up old threads in various forums involving SIMPLE indicators on LARGE time frames. I am almost certain they will have a big goal, and because they can't reach it gave up on it.
This is my view on the market, stick with the old and add a touch of modernity.
Thanks for reading